We provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset...

This paper aims at analyzing the implications of individuals' consumption jealousy on the dynamic structure of a two-sector model economy. We find that status-seeking substantially influences both, the long-term properties and the adjustment behavior of the model. Depending on the status motive,...

We analyze a generalized neoclassical growth model that combines a normalized CES production function and possible asymmetries of savings out of factor incomes. This generalized model helps to shed new light on a recent debate concerning the impact of factor substitution and income distribution...

This paper shows that the consumption-based asset pricing model (C-CAPM) with low-probability disaster risk rationalizes large pricing errors, i.e., Euler equation errors. This result is remarkable, since Lettau and Ludvigson (2009) show that leading asset pricing models cannot explain sizeable...

We study structural change in a simple, two-sector endogenous growth model and show that the presence of commodity-specific consumption externalities can be a source of structural change. When the degrees of consumption externalities are different between different goods, the two sectors grow at...

We scrutinize Thomas Piketty’s (2014) theory concerning the relationship between an economy’s long-run growth rate, its capital-income ratio, and its factor income distribution put forth in his recent book Capital in the Twenty-First Century. We find that a smaller long-run growth rate may...

We analyze a generalized neoclassical growth model that combines a normalized CES production function and possible asymmetries of savings out of factor incomes. This generalized model helps to shed new light on a recent debate concerning the impact of factor substitution and income distribution...

We propose a simple and powerful method for determining the transition process in continuous-time DSGE models under Poisson uncertainty numerically. The idea is to transform the system of stochastic differential equations into a system of functional differential equations of the retarded type....

We propose a simple and powerful numerical algorithm to compute the transition process in continuous-time dynamic equilibrium models with rare events. In this paper we transform the dynamic system of stochastic differential equations into a system of functional differential equations of the...